For the last several years, the economy has ranked #1 among the greatest concerns expressed by most Americans. And as we all know, the state of the economy has a huge bearing on the investment markets. With that in mind, let’s take a look today at the latest economic and tax proposals of the two presidential candidates, Hillary Clinton and Donald Trump.

Both candidates have made tweaks and changes to their economic and tax plans in recent weeks, and both have made more details available about how their plans should work. But even with the latest changes, both candidates’ plans are night-and-day different.

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Trump’s Economic & Tax Plan Looks a Lot Like Ronald Reagan’s

As a way of getting into today’s discussion of Trump’s economic and tax plan, let’s briefly go back and look at President Ronald Reagan’s economic and tax plan which he unveiled in 1981 after taking office. There are a lot of similarities.

Early in his presidency, Ronald Reagan enacted historic tax cuts to save the economy from the high-unemployment, high-inflation left over from the 1970s. Reagan acknowledged many times that he was following in former President John Kennedy's footsteps. Many Americans don’t remember Kennedy’s tax cuts because they were enacted after his assassination.

Both presidents, Kennedy and Reagan, followed an economic growth model that emphasized tax cuts and policies that supported a strong US dollar. Both men also reached across the aisle and garnered strong bipartisan support for their plans. That was another day, of course.

Under Ronald Reagan, individual tax rates were slashed from 70% to 28%, corporate taxes were significantly reduced and numerous loopholes were closed. And the American economy grew mostly between 4% and 5% annually for years thereafter.

Earlier this month, Donald Trump went a long way toward joining the ranks of Kennedy and Reagan. Speaking at the Economic Club of New York on September 15, he delivered a bold, optimistic growth message that falls squarely inside the JFK-Reagan model. He said at onset:

“My economic plan rejects the cynicism that our labor force will keep declining, that our jobs will keep leaving and that our economy will never grow as it did once before.” In short, Trump’s plan was based on a vision of optimism rather than the status quo (Obama/Clinton).

Trump established a goal of 4% annual economic growth, which would double the stagnant rate of the past eight years. The centerpiece of his plan is a reduction in business tax rates for large and small firms to 15% from the current uncompetitive 35%-40%, the highest in the developed world.

High business taxes are the biggest obstacle to a return to rapid economic growth. Abundant research has shown that the best way to raise wages and create jobs is to slash business taxes. Within five years a business tax cut will pay for itself, and then some.

In addition, he proposes immediate expensing for corporate new investment. This move alone could spark a significant increase in business spending on plants, equipment, technology and of course new jobs.

Perhaps equally important, Trump proposes a one-time 10% repatriation tax rate to incentivize American firms operating overseas to bring an estimated $2.5 trillion of offshore profits home. This money could also be used almost immediately for new business investment and job creation. Together, these business tax proposals could really goose the economy.

How about individual tax reform? Trump plans to reduce individual tax rates with three new brackets of 12%, 25% and 33% as the top rate. He would cap deductions for the wealthy and close special-interest loopholes. Middle-income wage earners will be the biggest beneficiaries of these reforms.

On top of the tax cuts, Trump promises to roll back out-of-control regulations, unleash American energy and replace the Obamacare failure. Following the successes of the JFK and Reagan tax reforms, it is possible that Trump’s strategy could actually generate 4% to 5% growth over time. As has happened often in the past, a rising tide will lift all boats.

The question, of course, is how will Trump pay for all these tax cuts. Trump claims that if economic growth surges to 4%-5%, that will pay for most or all of it. His critics claim that he will add $4-$5 trillion to our national debt over the next 10 years if the economy doesn’t respond.

The questions about how Trump will pay for his economic and tax plans are indeed valid. And I will come back to those questions at a later time. Now let’s shift our attention to Hillary’s latest economic and tax plans.

Clinton’s Economic & Tax Plan is a Lot Like Obama’s, But Worse

The contrast between the presidential contenders could not be starker. Hillary Clinton would raise taxes on so-called “rich people,” corporations, capital gains, financial transactions and inheritance – despite the fact that America has never taxed its way into prosperity.

Since I am biased against Hillary, I will summarize her economic and tax plans as reported by USA TODAY in mid-August when she announced them, along with subsequent changes.

Raise Personal Income Taxes. Clinton would increase taxes, mostly on the wealthy, to pay for her new (bigger government) programs. The top 5% of income earners would bear 90% of the increased tax burden, according to the Tax Policy Center. The impact on spending and the economy is expected to be modest because wealthy individuals tend to save, rather than spend, their incremental income.

Still, “it’s going to hurt spending, saving and investment” to some extent, says Mark Zandi, chief economist of Moody’s Analytics. It also makes the tax code more complex, he says. Although the plan would generate $1.1 trillion in additional government revenue over the next 10 years, it will be more than used up by additional spending.

Raise certain corporate taxes. Clinton has no plans to reduce the corporate tax rate, which many experts say should be lowered from the current 35%-40%, the highest in the developed world, to make the US more competitive. Meanwhile, Clinton has proposed a new tax on high-frequency trading, and an “exit tax” on companies that move operations overseas. She has not addressed reducing taxes for small businesses, many of which pay the so-called “pass-through” rate based on their personal income taxes.

Crack down on trade violations. Like Trump, Clinton says she wants to crack down on China’s currency manipulation and theft of US intellectual property, adding she’ll beef up trade enforcement. Clinton says she’ll impose targeted tariffs on countries that violate trade protocols.

Clinton has echoed Trump in saying she opposes the Trans-Pacific Partnership, a trade deal that she originally supported but hasn’t been ratified by Congress. Economist Greg Daco of Oxford Economics says Clinton’s new trade stance poses “the long-term growth risk of protectionism.”

Increase infrastructure spending. Her plan would boost spending by $300 billion to upgrade the country’s crumbling roads, highways, airports and waterways. That should create a million or more construction related jobs. Trump has a similar but even bigger plan.

Raise the minimum wage. The federal minimum of $7.25 an hour would rise to $12 over several years. The move would force businesses to increase prices, hurting sales and profit margins and substitute technology for labor – both of which dampen hiring.

Provide workers paid family and medical leave. It’s expected to cost $300 billion over 10 years and might keep employees from leaving the workforce, making the economy more productive, Mark Zandi says. Trump has a similar plan.

Offer a tax credit for childcare expenses. Clinton’s plan should be more beneficial to low- and middle-income families, which could subtract the amount of their child care costs from their tax bill by up to 10% of their income. Trump has a similar plan.

Reduce education costs. She wants to make state and community colleges “tuition-free” for middle-income families and help debt-burdened graduates refinance their loans. Providing more access to education creates a better-trained workforce but the benefits to the economy may not be felt for years, Zandi says.

Raise the estate tax significantly. Last Thursday, Clinton revised her plan to increase the “death tax.” Earlier she announced her plan to raise the death tax from 40% to 45%. Now she says all estates over $10 million will pay 50%, over $50 million will pay 55% and over $500 million will pay 65%. She just can’t punish success enough!

To date, Ms. Clinton has not announced any specific plans to roll back regulations and red tape as Mr. Trump has promised. So, apparently, it will be business-as-usual in that regard if she is elected – ever bigger government.

USA TODAY’s Paul Davidson, who wrote the summary of Clinton’s economic and tax plan concluded, “Trump has an economic-recovery-and-prosperity plan. Clinton has an austerity-recession plan.” He added that historically, in presidential elections, the optimistic growth plan nearly always wins.

It will surprise no one reading this that I much prefer Trump’s economic and tax plans over Hillary’s. While some of Trump’s plans are questionable as to how well they will work, Hillary’s tax and spend, bigger government plans will almost certainly lead to a recession by 2018, if not sooner.

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Forecasts & Trends E-Letter is published by Halbert Wealth Management, Inc. Gary D. Halbert is the president and CEO of Halbert Wealth Management, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, Halbert Wealth Management, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.